PERSON OF THE WEEK: John Walsh is the CEO of LERETA, a national provider of real estate tax service and flood hazard determination products that help lenders and servicers increase the efficiency of their operations; reduce costs; and improve their relationships with borrowers, investors and regulators. MortgageOrb recently interviewed Walsh to learn more about where the mortgage industry is headed in 2016 – and whether there will be a slowdown in the introduction of new regulations.
Q: You have been around the mortgage industry for some time. Why did you choose LERETA as your next venture?
Walsh: First, I was enormously impressed by the people at LERETA. In my view, one of the most important ingredients in a successful mortgage lending vendor is understanding the lending business. In addition to an incredibly dedicated team, the company has an exceptionally experienced team. The managers, for example, have an average of 20-plus years of experience in the industry.
Second, I was impressed by what LERETA has accomplished in recent years. During the last five years, the company has grown to be the second-largest tax vendor in terms of loans under service and by far the largest vendor in terms of number of clients.
Finally, I’m excited to see what we can make of this opportunity. Until recently, the largest lenders only had one choice when it came to a tax service vendor. One firm had the critical mass of loans under service to support the largest lenders. LERETA is now clearly at that point and in the position to offer these lenders another choice. Based on what I’ve heard from some of these lenders over the last year, they want another choice.
Q: Where do you see the mortgage industry going this year?
Walsh: Many lenders will be looking to the purchase market for a growth opportunity. These companies fall into two categories: ones that will enter the purchase market and ones that will increase their existing investment in purchase loans. What will be most interesting to see is which lenders will focus on growth by using traditional methods, such as increasing the number of loan officer numbers, and which will focus on Internet strategies. Also, the increasing cost of compliance on the servicing side will affect how lenders look at the business. Though the cost estimates of compliance vary widely, it is safe to say companies will consider the effects on their bottom line.
Q: What big news will there be in tax and flood industries this year?
Walsh: We are seeing some lenders who want to outsource more of their tax business, while others are leaning in the exact opposite direction, looking to build their internal capabilities. Both contingencies need to partner with a vendor that is flexible and willing to meet their individual needs.
Q: How do you see the mortgage industry adjusting to the regulatory climate?
Walsh: I’m not sure that any industry has ever experienced as much increase in regulatory oversight as the lending industry has seen during the past few years. It’s a testament to the quality of the people, and the quality of most organizations, that despite this burden companies have continued to originate and service loans with minimal negative effect on borrowers. The increased cost that servicers have to manage is something that may have future consequences. The revenue side of servicing is largely fixed, and costs, due to regulation, have increased substantially. A rising interest rate environment may reduce prepayment speeds, helping servicer profitability. However, there are challenges that individual lenders and investors will need to consider going forward relative to the attractiveness of servicing, such as what capital is invested in servicing, etc.
Q: What do you see on the horizon from the feds for the mortgage industry?
Walsh: Unfortunately, I don’t believe that 2016 is going to see a reduction in regulatory activity. A new administration in 2017 might yield improved oversight of regulators and a focus on, or at least recognition of, the cost and benefits of the continued heightened regulation of the lending industry.